Rural economy shifts away from agriculture
Graphics: Agamir Somoy
Bangladesh’s rural economy is undergoing a structural transformation, reducing reliance on agricultural income and expanding non-agricultural activities.
General Economics Division (GED) of the Planning Commission identifies several key factors driving this shift, including remittances, improved communication systems, corporate involvement, new production relationships, social changes, the role of women, power dynamics, and the influence of local politics.
Five-Year Strategic Framework said due to structural transformation toward non-agricultural activities, employment in the agricultural sector, which stood at 43 percent in 2020, could drop to 20 percent by 2030.
GED report added that rapid changes have taken place in the country’s rural areas over recent decades. Consumer demand, aspirations for education, and urban influence are shaping a new reality where farmers are no longer confined solely to agriculture, as non-agricultural activities continue to grow.
The nation’s rural economy is undergoing a profound structural transformation, challenging traditional concepts of the “agricultural household”. Rural livelihoods are diversifying, with more than 60 percent of income for many agricultural households now originating from non-agricultural sectors.
The report highlighted, “Around 13 percent of people depend on farming. At the same time, due to the expansion of mechanization, rising agricultural wages, and the inclination of rural laborers toward non-agricultural activities, agriculture-based employment is declining rapidly. This shift is also transforming household roles.
“As men move to urban and non-agricultural work, women are taking charge of crop production, livestock, and poultry rearing. However, agricultural extension, credit, and market systems have not yet established a strong foothold for female farmers.
“On the other hand, farmers are showing a clear interest in diversifying away from rice cultivation to high-value crops like corn, vegetables, and potatoes wherever market access, credit, and technical support are available. Nevertheless, this transformation remains unequal and fragile.”
Bangladesh Institute of Development Studies (BIDS) Research Director Kazi Iqbal conducted research since 2000 titled “Structural Transformation of the Country’s Rural Credit Market”.
Speaking on the matter on 12 October, he said, “The share of agriculture in total rural credit is declining. The portion of rural credit actually taken for agriculture has dropped from 25 percent to 16 percent. This can be called a reflection of the overall structural transformation of the economy.
“Moreover, the agricultural credit that is taken is primarily spent on purchasing fertilizer, seeds, livestock, and cash land leases, whereas virtually no money is spent on buying agricultural machinery.”
GED framework points out that agriculture in the country is predominantly operated through small farms, where the average farm size shrank from 1.5 hectares in the 1960s to 0.6 hectares in 2021.
Rice cultivation covers nearly 75 percent of arable land and meets around 70 percent of total calorie intake. The average yield of rice has increased significantly from 1.7 tons per hectare in 1971 to 4.8 tons per hectare in 2023.
Although high-yielding varieties such as BRRI Dhan 107 and BRRI Dhan 108 produce 6-7 tons per hectare under favorable conditions, a yield gap of 25-40 percent exists compared to current average farm yields, making it crucial to bridge this gap.
GED report noted that while annual growth in the agricultural sector exceeded 4 percent from 1996 to 2019, it slowed down to 3.21 percent in the 2023-24 fiscal year. This slowdown is occurring at a time when food inflation and reliance on wheat imports make accelerating growth more urgent than ever.
According to GED Member (Secretary) Monzur Hossain, the rural poverty rate in the country declined from 53 percent in 2000 to 26 percent in 2022, marking one of the most sustainable examples in South Asia’s development history.
He noted that this achievement is real and should not be undervalued, with the primary driving force being remittance flows. In high-migration districts, foreign earnings account for 30 percent or more of rural household income.
Other contributing factors include women’s integration into the garment sector, financial services provided by NGOs, and the commercialization of agriculture.
